'Not an election budget', state goes further into debt

Tasmania's Premier and Treasurer has handed down a pre-election budget without the usual election sweeteners.

The state will post its biggest ever deficit of $426 million this financial year and the budget will not return to the black until 2017.

Lara Giddings has delivered her third budget, revealing Tasmania will spend a record $5 billion on government services and initiatives.

The state will borrow to fund a state budget which has no savage cuts and little in the way of tax relief.

The state goes into record debt amid a combination of falling revenues and unexpected spending.

When she became Treasurer, Ms Giddings said the state could not afford to go into net debt, but today's budget does just that.

Since then, revenues have plummeted and the budget reveals they continue to fall.

Tasmania will now use the credit card until 2017.

The Treasurer is partly blaming massive revenue writedowns for the change.

"We have had unforeseen circumstances that could not be predicted," she said.

Budget snapshot

Deficit blows out to $426 million

Next year's forecast surplus evaporates

Return to surplus forecast in 2017

Revenue from energy assets down $410m over four years

State taxes return $184 million less than forecast

Payroll tax threshold rises from $1m-$1.25m

First home owner grant scrapped for existing houses

$83 million for Gonski education reforms

$16 million to help launch DisabilityCare

The budget contains no new taxes and no increases in existing taxes. There are also none of the big public service job cuts of the past.

Instead, the Government has decided to let the state go further into net debt as it prepares for the election.

Ms Giddings has defended her decision to borrow more instead of making further budget cuts and denies the move is due to the impending poll.

"I believe we have a strong financial record and I will not hear anything less," Ms Giddings said.

"It is about responsible fiscal management. To cut harder and faster, or to increase the tax burden at this time, would have an unacceptable impact on services.

"I have not framed this budget in regards to an election."

Blow out

The deficit has blown out to $426 million, $143 million worse than what was forecast a year ago.

The budget is not expected to return to the black until 2017 and not after the next state election as promised.

The Government blames revenue drops, including a $184 million write down in state tax returns over the next four years.

The budget papers say GST receipts will be down $94 million over the same period.

The biggest revenue hit will come from the Government's three energy companies because Aurora Energy will be sold and the carbon price has been cut on Hydro Tasmania.

Expected returns from the businesses have fallen $410 million over the forward estimates.

The bill from January's bushfires and funding the Tasmanian Forests Agreement have also affected coffers.

The state will remain in debt until 2016 to keep afloat, peaking in 2014-15 - that equates to about $450 of debt for every Tasmanian.

Ms Giddings says that will be the lowest rate in the country.

Path ahead

I believe we have a strong financial record and I will not hear anything less.

Tasmanian Premier Lara Giddings

As expected, there are few election sweeteners in the budget, but the Premier has opted to step back from further austerity measures.

While backing away from further cuts to departments, the previous savings strategies will still need to be achieved.

The Premier cannot say whether her budget there will be more public service job cuts.

"Certainly there are decisions that agencies will need to make around the savings they need to find, but there will be no forced redundancies of any public servants."

The Health Department's budget is $1.2 billion next financial year, up 3.5 per cent, but it will still need to find $10 million next financial year to meet cuts outlined two years ago.

Education will get an extra $83 million over four years to implement the Gonski report and there will be $38 million for upgrades.

Three primary schools and six high schools will share the money, but overall spending on school infrastructure is down by $15 million on last year and savings of $7 million will still need to be found by the department.

More money for police

The Premier has defended spending on the Gonski changes and the national DisabilityCare package, saying the state can still pay for the reforms and pay off debt.

"I would not put the state at risk if I didn't think we could deliver on it. We can," she said.

After slashing its workforce over the past two years, police will get an extra $32 million over four years to pay for recruitment of new officers maintaining numbers at 1,120.

There will be payroll tax relief. The threshold will be raised from $1 million to $1.25 million, providing savings to more than 2,000 businesses.

It comes at the expense of first home buyers who will lose a $7,000 payment when buying an existing home.

As well as schools spending, there will be $17 million on remedial works at ports at Sullivans Cove, Inspection Head, Stanley and Strahan.

"What has changed has been the stimulus of the Commonwealth, so the Commonwealth had major infrastructure spends on schools for instance that have now washed out of the system," she said.

"But the state contribution remains high and it's around $1.4 billion over the next four years. That's money into roads, into schools and into other vital infrastructure around the state."

The Department of Premier and Cabinet will be given $800,000 over four years to develop a new Asia Institute with the university.

'Horror show'

The Opposition Leader Will Hodgman says the size of the budget deficit locks in a recession.

"We now have an economic horror show," he said.

"This makes very grim reading for anyone who's looking at the state of Tasmania's finances, they can see that they are in a mess.

"This budget debacle just reveals recession for Tasmania. There are record deficits, there's debt, Tasmanians not getting employment opportunities in this state and our economy not moving in the right direction.

"You cannot put a positive spin on this. This is terrible news for people concerned about our finances, people concerned about our economy and about job creation in this state."